The Asia-Pacific region is projected to continue to grow in 2019 but at a decelerated pace, and regional policymakers are advised to look beyond domestic consumption for other potential drivers of growth.
The Policy Support Unit (PSU) of the Asia-Pacific Economic Cooperation (APEC) said in a recent statement that the region is expected to grow by 3.8% this year, down from 4.1% in 2018.
Downside risks dominate, mainly relating to trade tensions, policy uncertainty, and debt and financial vulnerabilities on the horizon.
In 2020, the APEC region is expected to grow moderately within the range of 3.5% to 3.7%.
Policies encompassing a broad range of sectors can be enacted to continue to support economic expansion in the region and rev up growth potential, said the PSU.
While domestic consumption has surpassed trade as the region’s main growth engine, there are “different drivers of growth out there that are still untapped,” said Dr. Denis Hew, director of the PSU, which advises the 21 economies of the Pacific Rim region on economic analysis.
Multiple policy levers can brighten the region’s outlook, said Hew. First, maintain and accelerate consumer spending by keeping monetary policy flexible where inflation is not a major concern and stepping up structural reforms to encourage more spending.
People tend to save too much when there is uncertainty and lack of access to quality basic services, Hew explained. “They have to save for education. They have to save for healthcare,” he said. “This is where structural reform of public services and social protection come into play.”
Other potential sources of growth include the digital economy and the services sector. The PSU said both can contribute to growth by opening up trade and encouraging greater economic participation.
Broadening opportunities, such as for small and medium-sized businesses and women-led enterprises, can spur growth and encourage more confidence in economic integration, it explained.